Mitigation and expert evidence: the pitfalls

Hirtenstein v Hill Dickinson was a solicitors’ negligence case concerning the purchase of a luxury yacht. There have been a number of superyacht claims recently and they have often arisen as a result of late delivery. However, here one of the yacht’s engines was found to have been defective after sale. The issue was whether the purchaser’s solicitors should have advised the buyer that the seller should provide a personal guarantee as a condition of purchase.

While the court found that there had been negligence, it decided that it was not causative of the claimant’s decision to purchase the yacht without a personal guarantee. This meant that no loss was suffered. However, obiter, the court considered the principles of mitigation, and criticised the expert evidence in terms which are likely to be of wider interest.

Mitigation of loss

Mitigation of loss is a principle perhaps more discussed than understood. This decision is a timely reminder that there is in fact no duty to mitigate in the sense that a claimant who does not mitigate his loss has done nothing wrong. What he does do is limit the damages he can recover.

The court stated the “true” principle as being that, where there is more than one option reasonably available as a result of the defendant’s breach of duty, the claimant can only recover as damages the costs of the least expensive option. Additional costs relating to more expensive options cannot be recovered.

In a construction context, the principle is often encountered where, following termination of a contractor’s employment, the employer has to re-let the works and may be criticised for accepting a tender well above that originally put forward by the former contractor. Sometimes that contractor may even offer to carry out the balance of the works, perhaps on a cost-plus basis.

In this situation, the question which must be asked is whether the various options open to the employer are all reasonable and, if so, whether the employer proposes to choose the least expensive option. In Hirtenstein, there were other reasonable alternatives to replacing the defective engine with a new engine, such as using a reconditioned replacement.

In a termination situation, the employer might legitimately conclude that to accept an offer from the original contractor might involve expenditure greater than the face value of any proposal, given that there has already been a history of troubled relations between the parties. The court is unlikely to need to consider the results of a detailed costing exercise. Rather, it will review in broad terms what options are reasonably available to the employer and whether his prediction of the outturn cost of each option is a reasonable one.

Experts’ evidence again

The court also took the opportunity to add to the now lengthy catalogue of critical views about experts. Neither side’s expert fared well.

The claimant’s engineering expert:

Assessed the costs of restoring the yacht to its warranted condition but had included “palpably unjustifiable” items, literally including the kitchen sink!

Assumed that items which were purchased for the yacht should be classified as repairs rather than upgrades without applying his mind as to whether this was the proper classification.

Included an appendix that he was completely unable to explain.

The court concluded that he was not a fit person to act as an expert witness on his showing in this case, and refused to attach any credence to the figures “rubber-stamped” by him for the alleged cost of repairs.

The defendant’s expert fared little better. His approach was described as putting the available information into a “black box” from which a figure emerged based entirely on his gut feel. This was described as effectively saying “trust me, I’m an expert valuer”. Lack of objective evidence to justify the results contended for was roundly criticised and effectively discounted.

As this case indicates, judges are becoming ever more vocal in their criticisms of expert evidence. The need to ensure that such evidence is obviously objective, well reasoned and clearly explained cannot be overstated.